Can Jill Soltau rebuild J.C. Penney?


On J.C. Penney’s second quarter conference call with analysts, CEO Jill Soltau made clear that her job and that of her team was not simply running the department store chain’s business. It was rebuilding it.
The retailer managed to cut its quarterly loss in half even as same-store sales fell six percent (excluding discontinued appliance and furniture sales). However, Penney continues to face multiple challenges, including carrying billions of dollars in debt, the threat of having its stock delisted by the New York Stock Exchange, establishing a point of difference with department store, online and specialty retail competitors, and attracting new generations of customers that it has failed to connect with up until now.
On her call with analysts, Ms. Soltau stressed the size of the hole that Penney dug for itself over the last decade. Understanding this, she said, job one is moving the business into the black.
“I strongly believe that growing sales in an unprofitable way is simply not an option,” said Ms. Soltau (via SeekingAlpha). “The only way to reconstruct a business is through a holistic approach across all the key tenets of strategic, purposeful and effective retailing.”
To return to profitability, Penney has sought to cut down on excess inventory and reduce markdowns. Ms. Soltau said the chain had made progress on both fronts, cutting inventory levels 12.5 percent during the second quarter and changing Penney’s “markdown and clearance cadence … contributing to nearly half of our cost of goods sold improvement this quarter.”
The retailer, which has seen erosion in online sales, has worked to improve gross margins, evident in the recent quarterly results. Penney has improved its merchandise selection while making functional changes in presentation, search and other areas that helped the retailer improve “conversion and customer service scores year-over-year.”
With more than 80 percent of its total sales made in stores, Penney has focused on making it easier and more fun to shop in its physical locations. Ms. Soltau pointed to new centralized pickup and return areas, a new checkout process and a changing room pilot that Penney is looking to expand. The chain was also able to reduce shrink and improve operating margins by adding associates in high traffic departments.
Penney’s CEO said it will take “innovation, personalization and clear differentiations” to put the retailer in a position to “ultimately drive traffic and capture share of wallet.” She pointed to Penney’s partnership to open thredUP shops within 30 of the chain’s stores as an example. The shops, which will range in size from 500- to 1,000-square-feet, will allow Penney to offer its customers affordable “high-end brands” not typically sold in the chain’s stores while “catering to eco-minded consumers who want more sustainable options in their wardrobe.”
- C. Penney Company, Inc.’s CEO Jill Soltau on Q2 2019 Results (Earnings Call Transcript) – Seeking Alpha
- The clock is ticking for J.C. Penney – RetailWire
DISCUSSION QUESTIONS: Do you think Jill Soltau and her team can rebuild J.C. Penney, or was the chain too late in bringing new management on board? Where do you see the greatest areas of need at Penney?
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22 Comments on "Can Jill Soltau rebuild J.C. Penney?"
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Consultant, Strategist, Tech Innovator, UX Evangelist
Interesting progress but I believe that ultimately it’s futile. I think management is going to hit the wall once it achieves what are obvious fixes. There is no brand appeal. The company has had such a muddled last two decades that the shoppers it needs most have moved on permanently. The stores need expensive makeovers. The web site is average. The shoppers I’ve seen in my local J.C. Penney appear(?) to be in a lower financial tier and are not going to be thredUP customers.
Bottom line: it seems like Jill and her team are making progress in a maze that has no way out.
Chief Executive Officer, The TSi Company
Managing Director, GlobalData
I would like Jill Soltau to succeed. She has a common-sense approach based on years of solid retail experience. However, as much as I am sure that she can remedy some critical issues like inventory control, cost management and so forth, I think rebuilding the brand will be very difficult.
J.C. Penney needs a complete reformulation. That will be expensive and it will also take a lot of time to implement and for perceptions to filter through to customer behaviors. Given that J.C. Penney has a mountain of debt and is loss-making, time is the very resource the business does not have. This is all the more so if there is a consumer downswing in the near term.
The next six months will be critical. If J.C. Penney pulls some initiatives out of its hat then there is a chance – but I have to say it is a very, very slim one.
Founding Partner, Merchandising Metrics
Yes, J.C. Penney is late but maybe not terminally late. Yes, the debt is onerous but maybe manageable. The model for reinventing J.C. Penney exists. It’s called Primark. Product. PRICE. Presentation. That’s what the customer sees, feels and responds to. J.C. Penney must demonstrate proof of life ASAP in X number of stores to give confidence to debt holders.
Co-founder, RSR Research
Principal, Cathy Hotka & Associates
There’s a lot of work to be done here, particularly in merchandising. These stores look daunting — too much product, too much selection, too many SKUs. For Millennials, who are used to seeing five or six items at a time on a computer screen, it’s just overwhelming. Wait — did I just recommend Ron Johnson’s approach?
Director of Stewardship, Emergent Workshop
Never mind too much square footage. They need to find a way to break up and lease out some of that space. I mean this isn’t novel, it’s the way of retail for several years now. Yet their massive, horrifically merchandised, sad looking stores are all still sitting there with less inventory and price updates. Who cares?
EVP Thought Leadership, Marketing, WD Partners
Wait, I remember this when it was called “Ron Johnson.” Maybe she will learn from his mistakes and actually make this turnaround happen, but you get the feeling that the macro forces that now grip modern shopping have long left J.C. Penney behind no matter what genius they bring in. Lemme see, try a “town center” in the middle of the store? That might work. Thanks, Ron.
Chief Marketing Officer, Impact 21
More power to Jill, but I think it’s too late. I don’t think J.C. Penney has enough of a brand left to be rebuilt given its financial situation. There’s too much to do and not enough time to do it. I suppose it’s possible that younger generations have simply no frame of reference for what J.C. Penney is/was that they could be introduced to whatever the new version of J.C. Penney turns into, but that would likely have to be on a much smaller scale than the size of the current company.
President, Spieckerman Retail
Independent Board Member, Investor and Startup Advisor
Late is so relative. At this point, the actions are drastic but not impossible. On top of the typical retail issues of managing inventory, introducing fresh brands and styles, and enhancing the shopping experience, the J.C. Penney team must clear out some really big boulders: debt refinancing, lackluster online sales, and driving traffic to their physical stores, which is becoming a fundamental issue for mall-based retailers.
Each of these elements need not be fatal; however, simultaneously addressing a cluster of them requires making a series of quick and near perfect decisions with flawless execution. Jill Soltau and her team have the talent and the will, but time and the tariff trade policy uncertainties are not on their side.
Principal, Retailing In Focus LLC
Jill Soltau (a former Kohl’s colleague) has the right ideas about applying fundamental ABCs of merchandising to Penney’s problems — product, promotional cadence, and so forth. And hopefully she has filled her team with like-minded, commonsense people. The question is whether she has time for a turnaround.
The situation is akin to the post-Johnson era at J.C. Penney, when Mike Ullman took over the reins again as CEO and went into full survival mode. The company took some big steps backward under Marvin Ellison — the deep dive into major appliances being the most costly — and now Soltau and team have to scramble again. But do the company’s financial stakeholders have the desire to save J.C. Penney again, at a point where the mall-based retail model looks more vulnerable than ever?
Principal, KIZER & BENDER Speaking
It’s easy to be an armchair quarterback and talk about all the things wrong about J.C. Penney. For reasons Paula pointed out so well, the retailer didn’t get to where it is overnight, and it can’t be fixed overnight either.
Jill Soltau and her team are making a difference. She’s not trying to build the ultimate department store, she’s trying to put Penney’s in a place to “ultimately drive traffic and capture its share of wallet.” She’s making progress, but she needs time to dig out of a very large hole that she didn’t create. I want to see Jill and Penney’s succeed, we’ve lost too many important retailers already. I wish her all the luck in the world.
Director of Stewardship, Emergent Workshop
There’s no place in the landscape for J.C. Penney and this is what kills me about the Sisyphean task which everyone, not just Jill, is mistaking for a Herculean task.
Principal, KIZER & BENDER Speaking
Jill Soltau said: “I strongly believe that growing sales in an unprofitable way is simply not an option, and to cut down on excess inventory and reduce markdowns.” Can’t argue with that. However, we live in a hyper competitive retail world where competitive change is made in minutes and days, not quarters. That means that J.C. Penney must run at least as fast and really faster than their competitors to play the game. In my opinion, Jill Soltau is a brilliant merchant, but the pace of being able to catch up and reposition J.C. Penney, while controlling inventory levels, enhancing margin and minimizing markdowns will be a daunting task.
Founder, Grey Space Matters
At the risk of echoing what seems to be a consensus among BrainTrust members here, I’ll simply say no. J.C. Penney has long since lost its relevance and like others who have failed to rebuild, the headwinds are just too strong and are likely to intensify over the next four to eight quarters. There is nothing special or unique about J.C. Penney other than its struggles.
CEO, President- American Retail Consultants
Too little, too late. JCP is trying to revive a retailing model that is past its prime. Add to this the financial and marketing hole it has to deal with, on top of the logistical nightmare of rapidly outdated, outmoded, expensive, product in their stores and warehouses and you have a recipe for continued failure. JCP needs to have a fire sale, reduce stores, eliminate inventory and restructure itself to be something other than a department store.
sales management consultant
The 21st century retail business fundamentals have not changed from the past. The tools needed for success have. And so too have the marketing methods and communication imperatives.
I see no ability to address these requirements in the words or actions of the company. The buying of time until the market comes back will not ensure a future. Only understanding the market and getting in front of it will.
CFO, Weisner Steel
“…Same-store sales fell six percent.” Sadly, these six words overwhelm everything else.
Founder | CEO, Female Brain Ai & Prefeye - Preference Science Technologies Inc.
What a challenge! Jill Soltau is a true merchant to sign up for such an “undertaking.” No pun intended? Too bad JCP has not spent more time focused on selling online. A quick review of the JCPenny.com shopping experience versus some of its online competition (Walmart etc.) yields an interesting outcome. The JCP.com shopper experience, the UX and UI, is actually easier to navigate and the JCP.com offerings are merchandised in a cleaner and easier to shop format than the competition. Focusing on JCP.com is the opportunity to build additional sales in every corner of the internet. Versus the current strategy of dragging customers into old and tired stores requiring millions in upgrades. Live a little JCP! Your “Ace” in the hole, JCP.com.
Partner, Simon-Kucher & Partners
It’s great to see that Jill Soltau has the courage to turn around this iconic brand. What will be crucial in rebranding is to avoid repeating mistakes from history. For example, if the brand will continue to be about “great deals for premium products” and that is who shops at JCP, then reducing markdowns might be a good short-term strategy to regain profits but questionable on its efficacy long-term.
Consultant, AdoniisCollections.com
I wish Ms. Soltau and the team all the best. There is just one thing that really worries me about going forward — the debt! This factor may not allow the needed time.